Abstract

References (57)

Citations (8)

Using the URL or DOI link below will
ensure access to this page indefinitely

Based on your IP address, your paper is being delivered by:

New York, USA

Processing request.

Illinois, USA

Processing request.

Brussels, Belgium

Processing request.

Seoul, Korea

Processing request.

California, USA

Processing request.

If you have any problems downloading this paper,please click on another Download Location above, or view our FAQFile name: SSRN-id1272034. ; Size: 147K

You will receive a perfect bound, 8.5 x 11 inch, black and white printed copy of this PDF document with a glossy color cover. Currently shipping to U.S. addresses only. Your order will ship within 3 business days. For more details, view our FAQ.

Quantity:Total Price = $9.99 plus shipping (U.S. Only)

If you have any problems with this purchase, please contact us for assistance by email: Support@SSRN.com or by phone: 877-SSRNHelp (877 777 6435) in the United States, or +1 585 442 8170 outside of the United States. We are open Monday through Friday between the hours of 8:30AM and 6:00PM, United States Eastern.

Protective Governance Choices and the Value of Acquisition Activity

Protective governance structure is often viewed as costly to minority shareholders who bear the costs of opportunism by entrenched managers. A less common view is that protective governance structures encourage value-enhancing initiative, allowing risk-averse managers to pursue projects they would otherwise forgo. To assess these views we examine the acquisition decisions of S&P 500 firms between 1994 and 2005 and document two entrenching dimensions of governance: founding family presence and larger boards with more inside directors. We find that family firms destroy value when they acquire, consistent with an agency cost explanation for acquisitions. In contrast, firms with large boards and more insiders are more likely to acquire and to create value when they do acquire. These results are consistent with benefits to managerial initiative when managers are insulated from discipline. Finally, we find no systematic evidence that shareholder right limiting provisions either facilitate managerial entrenchment or lead to wealth losses through acquisition activity.